Bank of America Merrill Lynch is looking to sell a $92 million bond backed by “troubled” reverse mortgages backed by the Federal Housing Administration according to Reuters.
The bond includes 760 HECMs with borrowers are all in distress situations, including foreclosure. Whether or not they’re T&I defaults isn’t clear, but one analyst told RMD they’re likely “fall-out from various trades and flawed originations.”
Issuance of Ginnie Mae backed HMBS has been the dominant vehicle for reverse mortgage lenders, with $4.566 billion of HMBS issued during the first five months of 2010. It’s likely the group of loans are not HMBS eligible and is the reason BofA is turning to the private market.
BofA’s issue will be priced with an interest rate of 4 percent, with about 21 percent of the underlying collateral set aside as credit enhancement, or investor protection from loss, the term sheet said.
